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3 Things Millennial Advisors Think Boomers Need to Know

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Baby boomers are expected to live longer than any other generation in all of human history. Whether they realize it or not, these baby boomers will increasingly turn to millennials to solve the challenges that increased longevity will bring. 
 
Nearly half of all financial advisors are over the age of 55, according to Cerulli research. In other words, most advisors are getting ready to retire themselves! As a result, baby boomers will depend on the younger generation of financial advisors to help them navigate their golden years. Here are three pieces of advice that millennial advisors can give to their baby boomer clients. 
 
1) Don’t Restrict Yourself to One School of Thought
 
Our culture tends to be overly obsessed with labels and superlatives. Consensus just doesn’t sell the same as controversy does. As a result, so much of the dialogue on retirement planning sounds less like rational analysis and more like the barbs thrown about during a political debate.
 
Think about it: How often have you seen some “unbiased” article sing the praises of one financial product while smearing another?
 
This type of polarizing discourse is disingenuous at best and dangerous at worst. It’s the context that matters. What might be a great solution for you might be a terrible idea for your neighbor if they have an entirely different set of goals or circumstances. If there were a one-size-fits-all financial strategy that solved all your woes without risk, we’d all be perfectly aware of this miracle product.
 
But as we all know, this kind of perfection doesn’t exist. You would do well to remind your boomer clients that in the world of finance, all reward is tied to some element of risk or sacrifice. Financial products typically will emphasize some combination of growth potential, safety or liquidity — but never all at the same time. As a result, retirees most likely will need to deploy a combination of strategies to address the different challenges that life may present over time (cash for emergencies, annuities for additional income, investments for long-term growth, etc.). 
 
Millennial advisors have grown up in the era of information overload. They understand better than most people how to navigate through all the clutter online and in the media to find the truth hidden among the hype. Advise your clients to avoid anyone or anything that speaks in absolutes; they probably have an agenda that may not align with that of your clients. 
 
2) Avoid Using History as a Guide
 
Twenty years ago, cell phones filled up an entire briefcase and computers weighed as much as a small child. Today the two technologies are paired seamlessly and fit in your pocket (or on a wristwatch)! Millennial advisors have grown up in an environment where technology and innovation change on a daily basis. As a result, we tend to look forward, not behind.
 
Unfortunately, many financial advisors have their philosophies rooted firmly in the past. Many commonly espoused mantras are not only outdated — they also may be patently false. Too many of your baby boomer clients are basing retirement assumptions on 7 to 8 percent annual rates of return, the 4 percent withdrawal rule or the “safety” of systematically moving out of stocks and into bonds.
 
These old maxims have lost their relevance in an era that has been defined by heightened market volatility, historically low interest rates and increased longevity. Over the next 20 years, we are sure to witness amazing strides in technology and our way of life. But we’ll also be exposed to the consequences of our government’s ballooning deficits, underfunded social programs, escalating health care costs and the impact of soon-to-be increasing interest rates.
 
Stop and consider for a moment the enormous gravity of the retirement planning process. We take for granted that clients and advisors are working together at attempting to provide retirement income that must be capable of lasting two, three or even four decades! If anything goes wrong, that client may be forced back into the workforce, out of their home or to endure an undesirable standard of living. 
 
Millennial advisors have a more grounded perspective. The only thing we can be certain of is uncertainty, and our egos suffer no damage when we acknowledge that we cannot predict the future. Who warned you about the tech bubble bursting or the financial collapse of 2008? What great boom or bust comes next? Nobody knows! To justify any financial planning strategy on historical experience alone is entirely vacuous and a disservice to the respect and care that the retirement planning process deserves.
 
3) Think Like a Pensioner, Not a Gambler
 
Baby boomers were in the workforce en masse during the 1980s. For nearly 20 years, the stock market took off like a rocket. From January 1980 through January 2000, the S&P 500 increased by more than 1,468 percent!
 
Meanwhile the millennials entered the workforce — in the new millennium, of course. Form January 2000 to the present day, 16 years, the S&P 500 has increased only 126 percent. That’s a big difference and mostly due to greatly increased volatility — twice during the past 16 years we’ve experienced market corrections of nearly 50 percent. Millennials can still appreciate what the stock market is capable of delivering, but our expectations are certainly more cynical. What the stock market giveth it can taketh away — often violently so. A retirement plan built on the market’s cooperation may be a recipe for disaster.
 
A generation ago, most retired Americans had two checks they could depend on: Social Security and an employer-provided pension.
 
Pensioners are often the happiest and most confident of retirees. They define retirement by the checks arriving like clockwork in the mail each month. In addition, having been afforded the opportunity to estimate their pension benefits well in advance meant they could adjust their monthly budgets and lifestyle to fit comfortably within the limits of that income. 
 
Unfortunately, pensions have been getting phased out in favor of 401(k) and other contributory plans. Therein lies the problem: Pension checks are scheduled to arrive as long as your client lives, but 401(k) and individual retirement account withdrawals last only as long as your client’s account has a balance. As a result, a retiree’s monthly budget and lifestyle may change year to year based on the turns of the market. And there’s no guarantee, especially during this era of increased longevity and market volatility, that your client’s investment portfolio can sustain itself to act as a source of income for the full duration of their retirement.
 
Gamblers know that the difference between having a $100 steak for dinner versus lining up at the $5.99 buffet depends on the turn of a card or a roll of the dice. Why should anyone take that same chance with their retirement income? 
 
Millennials care about the boomers. Boomers are our parents, our teachers and our role models. We don’t want to see our boomer clients forced back to work or out of their homes if and when their sources of income run dry. Millennial advisors should convince boomer clients to consider gambling only with those dollars they can afford to lose. 

Michael R. Panico, CFP, is CEO of Arcadia Financial Group, Salem, N.H. He may be contacted at [email protected] .


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